Is the Nifty 50 Bearish, or Is Hope on the Horizon? Are Geopolitical Tensions Threatening Indian Market Stability?

At the close, the Nifty 50 was at 25,014.60 down by 0.93%

On October 4, 2024. The NSE Nifty 50 opened in the red, marking a dramatic end to the session. Nifty50’s drop of 235.50 points (or 0.93%) not only reflects the market’s struggle but also signifies its biggest weekly fall since June 2022, shedding 4.5% for the week.

Why this sudden plunge? The escalating geopolitical tensions in the Middle East have raised fears of disrupted crude supplies from this key oil-producing region, pushing prices higher. This surge in crude oil prices is particularly burdensome for net importers like India, straining the economy and investor sentiment.

After a shaky start, the market briefly rallied, inching toward 25,500, only to succumb to profit booking that dragged it below 25,000 at one point. As a result, investors watched their wealth evaporate by approximately Rs 3.99 lakh crore, with BSE-listed companies’ market capitalization slipping to Rs 461.26 lakh crore from Rs 465.25 lakh crore.

The ongoing geopolitical unrest has sent crude prices soaring, dampening hopes for an imminent RBI rate cut. The question remains—will this trend continue? Foreign investors have been noticeably selling off, further compounding the market’s strain. Market analysts suggest that a slight rebound may be on the horizon, but a decisive reclaiming of the 25,600 level is crucial for any positive shift in sentiment.

In addition to domestic pressures, Brent crude prices surged by $5.5 per barrel, now hovering around $78, raising inflation concerns. With FIIs diverting funds to China after its recent stimulus measures, the last three days saw a staggering Rs 30,614 crores in cash market sell-offs. **In stark contrast, funds directed at China have enjoyed inflows of over $13 billion, while Indian funds barely managed $107 million.

What’s Next? A Cloudy Outlook Ahead

The bearish sentiment is expected to persist in the near term. Investors are closely monitoring the Middle East conflict and are adopting a “sell-on-recovery” strategy, leading to a broad-based decline across sectors, notably in realty, auto, and FMCG. The only glimmer of hope appears to be in IT stocks, buoyed by anticipated benefits from US rate cuts.

A Reminder: History Repeats Itself

The tensions between Israel and Iran are contributing to global market volatility, with crude oil prices rising over 5% in just two days. Recent missile strikes and retaliatory threats have heightened concerns, although OPEC+ plans to ramp up production in December.

What’s the key takeaway here? While the current situation may feel dire, history tells us that these geopolitical flare-ups are cyclical. Nuclear deterrents exist to prevent outright conflict, and as the saying goes, “this too shall pass.” Staying calm and having a strategic plan in place is essential to navigating these turbulent times.

Can the Nifty recover from this downward spiral, or will the pressures continue to mount? Only time will tell, but vigilance and strategy are crucial in these unpredictable waters.

Bank Nifty: Down by 0.74%

The Bank Nifty opened on a weak note, dropping by 0.74 percent, and closed at 51,462.05, remaining in red throughout the session. Likewise, the BSE Sensex mirrored this trend, falling by 0.98 percent and ending the day at a low of 81,688.45.

On the sectorial front, the IT sector emerged victorious with a 0.36% gain. Infosys Ltd. led the charge, climbing 1.51%, while Coforge Ltd. followed closely with a rise of 1.06%. But as one sector thrives, another faces turbulence.

In stark contrast, the Media sector took a significant hit, becoming the top loser of the day with a decline of 2.61%. Saregama India Ltd. felt the brunt of the drop, plummeting by 6.08%, and TV18 Broadcast Ltd. wasn’t far behind, losing 2.94%.

FIIs recorded a buy value of Rs 14,524.79 crore, while their sale value soared to Rs 24,421.74 crore, resulting in a net outflow of Rs 9,896.95 crore.

DIIs demonstrated resilience with a buy value of Rs 20,286.53 crore against a sale value of Rs 11,381.45 crore, yielding a positive net value of Rs 8,905.08 crore.

Bank Nifty

The Nifty Banking sector had some gainers and some losers for the day.

The gainers included Bank of Baroda with a 2.10% increase, Punjab National Bank with a 0.79% increase, Axis Bank with a 0.62% increase, State Bank of India with a 0.40% increase, and Federal Bank with a 0.09% increase.

On the other hand, the biggest losers in the sector included AU Bank with a 1.60% decline, HDFC Bank with a 1.23% decline, ICICI Bank with a 1.23% decline, Kotak Bank with a 0.54% decline, and Canara Bank with a 0.04% decline. These results suggest that some of the banking stocks performed better for the day.

Gold and Silver Rate (INR) 4th October, 2024

Is the Rupee Holding Its Ground Amid Rising Challenges?

The rupee ended the week flat at 83.96 against the US dollar, but the calm could be deceptive. Surging crude oil prices and volatile geopolitics are keeping the pressure high, yet RBI’s intervention managed to keep the domestic currency from sliding to new depths.

On Friday, the rupee opened at 83.96 and hovered in a tight range of 83.93 to 83.97. The Reserve Bank of India’s dollar-selling tactics in short-term offshore markets provided support, preventing it from breaking the all-time low of 84.09, reached in early August. But despite the RBI’s efforts, the rupee remained fragile, weighed down by weak domestic equity markets and the unrelenting outflow of foreign funds.

So, what’s next for the rupee? Risk aversion in global markets and a strong dollar—fueled by escalating tensions between Israel and Iran—may push it further into negative territory. Some analysts expect the USD-INR spot price to fluctuate between Rs. 83.75 and Rs. 84.20 in the coming days, with traders eyeing the US non-farm payrolls report for additional cues.

Crude oil continues its upward climb, with Brent crude rising 1.12% to $78.49, adding yet another layer of pressure on the rupee.

Will the RBI’s defense hold, or is a new record low on the horizon for the Indian currency?

Stocks Highlights

Infosys Ltd. is catching the spotlight with its share price soaring by 1.51%, climbing from the previous close of Rs. 1,893.40 to a last traded price of Rs. 1,922.00. But hold on—don’t let the numbers fool you.

Intriguing Intraday Insight:
In a striking revelation, over the past 19 years, only 0.71% of trading sessions experienced intraday declines exceeding 5%. That’s a rare sight! However, are the bears starting to circle?

• A sell signal emerged as the 20-day moving average crossed yesterday. Historical data suggests an average decline of -2.18% in the week following this signal over the past five years.
• And it doesn’t stop there! A 14-day moving average crossover also appeared, hinting at a potential -1.96% drop within the next week, based on similar past trends.

Mahindra & Mahindra Ltd. has experienced a downturn, with its share price dropping -3.54% from the previous close of Rs. 3,129.85 to Rs. 3,019.00.

Unpacking the Numbers:
Intriguingly, only 1.1% of trading sessions in the last 19 years have seen declines greater than 5%. But, the intrigue doesn’t end there!

• Outstanding Performance: The company posted a Return on Equity (ROE) of 17.02% for the year ending March 31, 2024, outperforming its five-year average of 11.97%. This shows resilience, despite the dip!
• Expense Watch: In a deeper dive, Mahindra has allocated 5.42% of its operating revenues toward interest expenses and 7.68% for employee costs in the same fiscal year.

Advance Decline Ratio

Today, the advance-decline ratio was 0.52, and the market breadth was negative. The volatility index India Vix increased by 7.27 to settle at 14.13 and the FIIs were net sellers today.

DAILY MARKET ACTION
Advancers – 959
Decliners – 1831
52Wk High – 60
52Wk Low – 67
High Band Hitters – 94
Low Band Hitters – 107
200d SMA – 23129
50d SMA – 25034
20d SMA – 25502

Top Gainers and Losers Stocks

The top gainers were Infosys (+1.51%), ONGC (+1.18%), HDFC Life (+1.00%), Tata Motors (+0.85%), and Wipro (+0.65%).

The top losers were M&M (-3.54%), Bajaj Finance (-2.86%), Asian Paint (-2.40%), Nestle India (-2.33%), and BPCL (-2.31%).

Top Gainers and Losers Sectors

The top gainers sector were IT (+0.36%).

The top losers sector were Media (-2.61%), FMCG (-1.74%), Realty (-1.64%), Auto (-1.43%), and Financial Services (-1.09%).

SECTORS – NOTABLE ACTION
IT +0.36%
MEDIA -2.61%
FMCG -1.74%
REALTY -1.64%

Stocks Ban List

(SEBI) F&O ban list (GRANULES close at -569.75), (MANAPPURAM close at -189.30), (HINDCOPPER close at -330.35), (RBLBANK close at -197.69), (BSOFT close at -581.15), and (BANDHANBNK close at -186.86) are not currently on the stock exchange.

A stock enters the Ban List if its MWPL is above 95%. Implying that, Ban List shows the Futures and Options (FnO) stocks whose combined open interest in all FnO contracts for a given period crosses 95% of Market-Wide Position Limit.

IDFCFIRSTB, PNB, GNFC, BALRAMCHIN, and SAIL stocks has the possibilities of entrance in the ban list.

Daily Pivots

As per the above pivots data, 24600 to 25500 is the Nifty 50 trading range.

Read Previous -Daily Insights- here
Are the Bears Taking Control? Unraveling the Nifty’s 2% Plunge and What It Means for the Future
Nifty’s Sudden Fall: Bears Take Control as Markets Tumble! Are Investors Prepared for the Coming Storm?

This article is only for educational purposes and is not an investment advice.